Low vacancy rates, high rental and capital growth: Investors turn to co-living properties
Investors have turned to co-living to maximise profit and contribute to the rental crisis, with the sector set to grow further in 2025.
Knight Frank said the development-approved co-living sites are gaining momentum and seeing strong buyer demand with the firm recording two new sales and billing over $50 million in Sydney over 2024.
Traditionally, co-living offers high-quality rental rooms on short- to long-term leases, typically under boarding house regulations, targeting a 25-34-year-old market.
Unlike purpose-built student accommodation, co-living spaces feature more mature design elements and prioritise community-oriented amenities that foster social interaction, wellbeing and experience, while ensuring privacy in individual living areas.
According to Knight Frank senior sales executive in investment sales, Adam Droubi, the two recent sales showed the appetite for investors in the co-living development sector.
“We expect demand to continue throughout 2025, with demand for homes in Australia continuing to exceed available supply for the foreseeable future and housing affordability remaining an issue,” Droubi said.
“We are seeing more demand from end users for co-living sites, which are suitable for a wide demographic, and this renter appetite will fuel further development.”
Knight Frank’s latest sales include a 480-square-metre site in Ryde, approved for a co-living or new-age boarding house with 25 rooms, one commercial space, and eight car parks.
The Ryde site sold for $2,810,000, and its estimated gross income is over $845,000.
The second co-living sale was a 787-square-metre site in Marrickville sold for $4.85 million.
The site has been approved for 35 self-contained studio apartments with 400 square metres of retail space, and is expected to return a $1.15 million gross profit per annum.
Droubi said location is key for co-living investment properties.
“Investors looking to enter the co-living market should try and look for assets close to key transport hubs, educational facilities, medical or health hubs, and well-developed areas,” he remarked.
“Further, room sizes and layout are important too, which will have a direct correlation between rents achieved, retention rates and the asset’s overall vacancy levels.”
James Masselos, Knight Frank’s senior sales executive in investment sales, said increasing migration, stronger rental demand, and diminishing new supply will help the co-living sector to expand in 2025.
“Co-living is generally a more affordable type of housing for renters, hence, we believe it will continue to rise in demand, with higher rents and cost of living pressures,” Masselos said.
“These macro factors will continue to have an upward pressure on rental growth, and in turn, capital values, which will attract investors to the sector.
“The advantages of investing in the co-living sector are very minimal vacancy rates, attractive rental growth, higher yields than typical residential unit investments, and strong capital growth prospects,” Masselos said.